Prosecution of tax offenders doubles in first three years of Modi govt

Vowing to continue the crackdown on black money, Prime Minister Narendra Modi said Rs 1.75 lakh crore deposits in banks post demonetisation as well as 18 lakh people with income beyond known means are under scrutiny.

indiaUpdated: Aug 16, 2017 00:01 IST

Suchetana Ray and Jeevan Prakash Sharma

New Delhi, Hindustan Times

In a country where prosecution of tax crimes is low and conviction rare, the number of cases filed against tax evaders was 2,473 between 2014-15 and 2016-17.(Getty Images/iStockphoto)

Prosecution of tax cheats more than doubled in the three years since Prime Minister Narendra Modi took over, and more and more suspected evaders are paying up instead of resorting to long-drawn court battles, official figures show.

The numbers reflect the government’s focus on fighting corruption, a pledge Modi renewed in his Independence Day speech on Tuesday, saying the days of looting the country were over and that “black money” hoarders had nowhere to hide now.

In a country where prosecution of tax crimes is low and conviction rare, the number of cases filed against tax cheats stood at 2,473 between 2014-15 and 2016-17, up from 1,133 cases filed during the three years before that.

During the same period, more people agreed to pay and settle their tax disputes with the government – a process called “compounding”. While 1,163 cases were settled in the three years since 2011-12, the number almost trebled to 3,127 between 2013-14 and 2016-17, figures from the Central Board of Direct Taxes (CBDT) show.

Tax receipts from the compounding cases of the past three years were still being computed but initial calculations indicated a possible windfall of more than Rs 37,000 crore, a CBDT official told Hindustan Times.

Much of this was because of the Modi government’s drive against tax cheats that included a shock decision to scrap 500-and 1000-rupee notes and a new law to unearth unaccounted for cash stashed abroad.

To be sure, work on tightening the screws on tax evaders had begun during the Congress-led United Progressive Alliance government itself. The trigger was a list of Swiss bank account holders shared by France in 2011, the same year anti-corruption activist Anna Hazare went on a fast and sparked nationwide protests against graft.

“The HSBC list of Swiss accounts held by Indians came in 2011 and the tax department began probing, which led to a spike in raids and prosecution in 2013-14,” said MM Joshi, a former CBDT chief.

Thereafter, Modi rode to power, making fighting corruption an election pledge. One of his first moves was to implement a Supreme Court order on setting up a special investigation team (SIT) on black money.

“There has been a shift in philosophy in deterring black money and the data for the past three years shows the results,” said an official in the finance ministry on condition of anonymity because he was not authorised to speak to journalists.

In 2016, the government brought in two income disclosure schemes that gave tax evaders a final chance to come clean or face 85% in penalty and jail in a country where just 3% of the working population pays tax.

On Tuesday, a large part of Modi’s speech dealt with his government’s efforts to end corruption and bureaucratic lethargy and cut red tape.

He said the withdrawal of large currency notes had hauled around Rs3-lakh crore of illegal money into the formal banking system.

More than 300,000 “shell companies” funded by undeclared finance had also been uncovered through irregular transactions, he said, adding the licences of some 175,000 of the firms were cancelled.

Modi said 1.8 million people had been found whose wealth outstripped their income. Of these, 450,000 had admitted their “mistakes”.